Nafta

[mickeyd]

When I was watching the debate on TV this week between Sen. Obama and Sen. Clinton from Cleveland, Ohio they seemed to be quite concerned about the negative aspects of NAFTA. I came away from that debate with a feeling that I really felt uninformed because I had no idea that NAFTA was hurting so many folks.

After doing a bit of reading, it seems that I was not that misinformed after all. Both candidates probably know better than to bring up the subject here in Texas where this trade agreement seems to be better understood by the locals as they have been closer to the subject.

NAFTA did not begin shifting jobs from the USA to Mexico since it's passage 15 years ago under President Clinton. U.S. companies were setting up production sharing operations in Mexico back in the 60's. Mexico opened its economy and joined the rest of the world's trading system (including trademark and patent protection rules) in the 90's. NAFTA mearly codified what was already going on between US, Canadian, and Mexican companies. The way I see it, without NAFTA, this would have still continued. So why be so upset at NAFTA?

Maybe I have it wrong. If I am wrong, can someone here set me straight?

 

[chinaco]

Not sure of all of the details.

But! If your job was displaced because of moving the operation to Mx, you are probably not seeing the benefit of NAFTA. Whether or not NAFTA was the culprit.

I am sure that NAFTA removed some of the red-tape and lowered tariffs.

North American Free Trade Agreement - Wikipedia, the free encyclopedia

 

[youbet]

So why be so upset at NAFTA?

NAFTA enhanced the profitability of moving jobs/operations/business to Mexico, but did not start the process. NAFTA also simplified the process.

Would outsourcing to Mexico have occured without NAFTA? I think so, but to a smaller extent. That's why business, including the Megacorp I toiled for, worked and lobbied so hard to make NAFTA happen and profited extensively from it.

Some Americans have financially benefitted from NAFTA. Some have been devastated. The government recognized this and has provided some special compensation and programs for displaced workers who meet specific requirements.

 

[Texas Proud]

It is interesting that people complain that a trade treaty was the cause of their job being moved....

What treaty was signed that made all the companies move a lot of their operations to India?

What about all the jobs in China? And Japan way back when before they had a meltdown?

The companies will go where they have a competitive advantage... yes, a free trade agreement might make it a bit easier, but they probably would have gone anyhow...

 

[Brat]

My take:
A lot of the jobs lost in the north central states were the result of corporate miss-management in the auto industry. US executives drove their customers into the hands of others. Foreign manufacturers set up plants in the south central states and proceeded to increase market share.

In addition, many of the manufacturing facilities in the US were constructed in response to WWII. Facilities constructed abroad after WWII were much more efficient. Advantage: new producers.

In large part NAFTA and the removal of import barriers caused garment production to leave the USA. That industrial change was very disruptive for those involved. But, these were not high-wage jobs.

It is really hard for US workers to accuse their executives of incompetence and fleecing their employers with huge severance packages, but they should.

 

[chinaco]

During the last 60 years, the US enjoyed being the dominant player since Western Europe and Japan was bombed out and had to rebuild. Also because USSR (Russia and others) and China were virtually closed off with very weak economies.

It is a new time. We are going to have to figure out how to stay on top in this new world. I believe NAFTA is important, but there is some short-term pain with job adjustments.

Part of the problem is that US business people (CEO and Board) would sell their grandmothers for a short-term profit.

One very huge problem we have right now is energy. Why send our dollars to our enemies? We desperately need an energy program to keep money at home. Ethanol and nuclear program could help. We should probably figure out how to use our coal resources in an environmentally friendly way.

Energy could spur a huge industry in the US.

It is too bad that Ronald Reagan shutdown Carter's energy program. We would be almost 30 years ahead of where we are today.

 

[dumpster56]

It is too bad that Ronald Reagan shutdown Carter's energy program. We would be almost 30 years ahead of where we are today.

Oh Oh Oh... Wait, Reagan you are badmouthing Reagan Tisk Tisk... You will be tarred and feathered and giving Carter props is well Nice that is Nice..

 

[chinaco]

It is too bad that Ronald Reagan shutdown Carter's energy program. We would be almost 30 years ahead of where we are today.

Oh Oh Oh... Wait, Reagan you are badmouthing Reagan Tisk Tisk... You will be tarred and feathered and giving Carter props is well Nice that is Nice..

I call it the way I see it. Reagan is popular amongst ultra conservatives. For the rest of us he was so so. He made a few good moves and some bad moves. This particular one was not good. He wanted that money for other political reasons. The DOE is looking at some of the same programs proposed by Carter back then. Of course, the DOE is looking at others energy alternatives also.

I will also add that his VP (GHB) likely influenced the decision and of course he was unbiased.

 

[Midpack]

Part of the problem is that US business people (CEO and Board) would sell their grandmothers for a short-term profit. Wouldn't have anything to do with investors (all of us) expectations would it? "We get what we deserve.

One very huge problem we have right now is energy. Why send our dollars to our enemies? We desperately need an energy program to keep money at home. Ethanol and nuclear program could help. We should probably figure out how to use our coal resources in an environmentally friendly way. Agreed, except ethanol (corn based as least) is not a cost effective answer or solution - shamefully politically convenient.

Energy could spur a huge industry in the US.

Comments

 

[youbet]

Interesting comments. And all surprisingly in agreement that NAFTA greased the skids, so to speak, of outsourcing to Mexico but was not solely responsible. Much of the outsourcing would have occured anyway for the various reasons stated above.

OP's question, which we've all been skirting around, was "So why be so upset at NAFTA?" I think the reason labor and working class Dems in general don't like NAFTA is that they would have preferred some protectionist policies that protected their jobs rather than policies which, to some extent and in some cases, enhanced the profitability and ease of moving the jobs. They saw Clinton's pushing NAFTA as a betrayal of the ideology they elected a Dem president for.

In all practicality, I doubt NAFTA had all that much impact on outsourcing, but it did symbolically represent a Dem president supporting outsourcing which would be a disapointment to many labor and working class Dems.

 

[Texas Proud]

Yes... there were some negative impacts to the agreement as listed....

BUT, nobody is saying about the 'good' that happened.... we are able to sell items cheaper as THEIR protectionism has been reduced or eliminated...

And as someone pointed out today on one of the talk shows, the Canadians said go ahead and opt out... we will sell our oil sands to the Chinese... and from what they said, there is as much or more oil up there than in Saudi Arabia...

So.... when all is said and done... is it 'good' or 'bad'... or just the same....

 

[prgsdw]

And as someone pointed out today on one of the talk shows, the Canadians said go ahead and opt out... we will sell our oil sands to the Chinese... and from what they said, there is as much or more oil up there than in Saudi Arabia...

True, the oil sand deposits in Alberta are huge, to the tune of (according to Wikipedia) 174 billion recoverable barrels per the Canadian government at the "current price". This is out of 1.7-2.5 trillion barrels total. Very impressive.

Oil shale is another petroleum option and in that case, there is estimated to be 2.8 to 3.3 trillion barrels worldwide - with 62% of that in the United States in the Green River basin in Colorado, Utah and Wyoming. An equally impressive number.

However, the Canadian oil sands are producing ~1.2 million barrels a day (as of 2006 numbers) and they hope to increase that to ~5 million barrels a day by 2020. So that's 1.2 million out of the worlds ~85 million barrel a day consumption. And oil shale is still largely on the books as a research and development effort.

So the oil is there - you have to wonder - how much of the $40 billion in profit Exxon Mobil earned last year was spent trying to figure out how to profitably extract oil shale in the western US - when 70% of that oil shale is on land owned by you and me - via the Federal government...If the government wants to talk about an energy independent country - this is one place for the "moon shot" research money to pour into...

 

[Marquette]

OT, but I was just reading in my latest Sci Am about switchgrass. Regarding a 5-year study of yield per hectare, the magazine said "If processed by appropriate biorefineries (now being built), the yields would have delivered 540 percent more energy than was used to produce them, compared with at most 25 percent moer energy returned by corn-based ethanol."

Even if the claim ends up being overstated, it does lend some promise and credence to ethanol. Couple that with attempts to extract ethanol from corn silage and corn feed destined for livestock and I'm starting to think it could be viable.

This ethanol craze is really making it tough to find some land at a reasonable price around here though.

 

[youbet]

And as someone pointed out today on one of the talk shows, the Canadians said go ahead and opt out... we will sell our oil sands to the Chinese... and from what they said, there is as much or more oil up there than in Saudi Arabia...

...

Actually, the Canadians will sell their oil sands based pretroleum to the highest bidder be that the USA, Chinese or whoever, with or without NAFTA. The highest bid will determine the market price and those willing to pay it will get the oil. I don't believe for a minute the Canadians would sell to us a penny below the price they could get elsewhere, regardless of trade agreements.

 

[Texas Proud]

Actually, the Canadians will sell their oil sands based pretroleum to the highest bidder be that the USA, Chinese or whoever, with or without NAFTA. The highest bid will determine the market price and those willing to pay it will get the oil. I don't believe for a minute the Canadians would sell to us a penny below the price they could get elsewhere, regardless of trade agreements.

True... I was just stating what someone said on TV....

But... does anybody know the benefits that we have gotten from NAFTA?

 

[chinaco]

Actually, the Canadians will sell their oil sands based pretroleum to the highest bidder be that the USA, Chinese or whoever, with or without NAFTA. The highest bid will determine the market price and those willing to pay it will get the oil. I don't believe for a minute the Canadians would sell to us a penny below the price they could get elsewhere, regardless of trade agreements.

Good point. We are not getting a reduced rate. But I am not sure about how tariffs play into it.

However, Oil could be excluded from tariff.

The NAFTA concern is about Mx not Ca.

Putting up too many protectionist policies would not be good for the US. But we can begin driving a harder bargain on trade negotiations.

Until we fix this energy problem, we are scr3wed. A comprehensive energy program in this country would put many people back to work. Especially if it came from renewable sources.

Energy is another weakness of the Republican platform. They tend to be the party for status quo (big oil refiners).

I keep talking like this and I am going to talk myself into voting for a Dem.

 

[Texas Proud]

True... I was just stating what someone said on TV....

But... does anybody know the benefits that we have gotten from NAFTA?

OK... will do my own searching....

● U.S. exports to Canada and Mexico grew from US$134.3 billion (US$46.5 billion to Mexico and US$87.8 billion to Canada) to US$250.6 billion (US$105.4 and US$145.3 billion respectively).

USTR - NAFTA: A Decade of Success

And from another source...

"Though U.S. investment in Mexico has increased, American cash hasn't exactly been gushing southward. In the past four years, America's direct manufacturing investment in Mexico has averaged $1.9 billion a year, a fraction of the $200 billion invested annually in our domestic manufacturing capacity. In fact, U.S. companies invest far more each year in other high-wage, high-standard economies, such as those of Western Europe and Canada, than they do in such developing countries as Mexico."

After 10 Years, NAFTA Continues to Pay Dividends

Soooo... where is all the 'bad' that has come from NAFTA? It seems more like a 'non event' that something bad... and if it is a 'non event', why get out when it would cost us in political points... and if it is 'good' then even more reason not to get out.

 

[donheff]

OP's question, which we've all been skirting around, was "So why be so upset at NAFTA?" I think the reason labor and working class Dems in general don't like NAFTA is that they would have preferred some protectionist policies that protected their jobs rather than policies which, to some extent and in some cases, enhanced the profitability and ease of moving the jobs. They saw Clinton's pushing NAFTA as a betrayal of the ideology they elected a Dem president for.

In all practicality, I doubt NAFTA had all that much impact on outsourcing, but it did symbolically represent a Dem president supporting outsourcing which would be a disapointment to many labor and working class Dems.

I think that is about right. And, though I love them both, I suspect Obama and Clinton (Hilary) don't really give a rat's as about "dealing" with supposed NAFTA problems. They are just courting labor votes - not that there is anything wrong with that

 

[clifp]

The reality that Democratic politicians (and protectionist folks like Buchannan) don't talk about is that high paying blue collar manufacturing didn't get outsourced to Mexico, or India, or China. For the most part these jobs simply disappeared. They are gone and are never coming back.

The country that lost the most manufacturing jobs this century is China, by far.
The world needs less people to make cars, TVs, blue jeans etc than it did a decade ago. Just like at the beginning of the 20th century the world needed less farmers than it did the late 1800s. But pandering gets more votes.

 

[youbet]

I suspect Obama and Clinton (Hilary) don't really give a rat's as about "dealing" with supposed NAFTA problems. They are just courting labor votes - not that there is anything wrong with that

Of course they don't.......

I do give Hillary and her handlers a lot of credit for how they've been able to associate her with Bill's initiatives that are viewed favorably and disassociating her with those that aren't. Really running the obstacle course nimbly! She was there experiencing everything with Bill and therefore is now able to "answer the phone when it rings at 3:00 AM." But when courting Ohio labor/blue collar votes, "hey, NAFTA was Bill's program. I was serving tea and biscuits to the ladies at the quilting bee......."

Obama really wasn't there, but he still recommeds changes to NAFTA, at least he does so to ears that want to hear that it will be changed!

Whatever the voters want to hear......... Our politicians in action!

 

[youbet]

The reality that Democratic politicians (and protectionist folks like Buchannan) don't talk about is that high paying blue collar manufacturing didn't get outsourced to Mexico, or India, or China. For the most part these jobs simply disappeared. They are gone and are never coming back.

Well...... I supposed we'd have to get some numbers and see. As I said in earlier posts, there were fewer jobs outsourced than some folks like to think. But you're dead wrong in saying the number is zero. 400,000 people qualified for govt programs for extended unemployment compensation and training when it was substantiated that their facility was moved offshore. And I do know I spent my final working years moving the factory I managed here to China, hiring/training a Chinese crew and laying off the employees here. These were good jobs.

 

[HFWR]

Well...... I supposed we'd have to get some numbers and see. As I said in earlier posts, there were fewer jobs outsourced than some folks like to think. But you're dead wrong in saying the number is zero. 400,000 people qualified for govt programs for extended unemployment compensation and training when it was substantiated that their facility was moved offshore. And I do know I spent my final working years moving the factory I managed here to China, hiring/training a Chinese crew and laying off the employees here. These were good jobs.

Since our department was r&d, we weren't eligible for the extended UEB. We didn't "make" anything...

 

[clifp]

I didn't say zero jobs were lost to outsource, I said most manufacturing jobs seemly disappeared due to productivity.

Here some of the top google stories...

From the possibly biased national association of manufacturers
Where are the manufacturing jobs going?

Where are the manufacturing jobs going?

Since mid-2000, U.S. manufacturing employment has fallen by 3 million. Half of that decline took place during the 2001 recession and the other half has taken place during the 4-year old recovery. Today, U.S. manufacturing output is at an all-time high, yet factory employment is at its lowest level in more than 50 years. What gives?
Some claim that jobs are going overseas. So where are manufacturing jobs growing? China, might be a knee jerk reaction. But it would be wrong. Since mid-2000, manufacturing employment in mainland China has fallen by 11%. Then what about our NAFTA partners? Nope. Both Mexican and Canadian factory employment have fallen since 2000, as has manufacturing employment in Japan, Germany , the UK, France, South Korea, the Netherlands, Sweden, Australia, Belgium, Indonesia, Ireland, and Poland.
In fact, of the top 28 manufacturing countries in the world (which account for 90 percent of global manufacturing output), just 5 have seen increases in manufacturing employment over the last 5 years: Argentina, Brazil, Spain, Thailand, and Turkey.
The fact is that a downturn in manufacturing employment has been a global phenomena over the past half decade.
In the case of the U.S., half of the job losses can be attributable to an acceleration in productivity growth, which during the current recovery is growing 72 percent faster than productivity growth during the prior 4 manufacuturing upturns. The other half of the job loss is due the fact that the current recovery has not been as robust as previous ones. This was especially true in 2002 and 2003, when manufacturing output averaged under 2% growth and when over 90% of the post recession job losses in manuacturing took place.

From the pretty reliable Conference Board . China Losing More Manufacturing Jobs Than U.S. But Adding Service Jobs at a Rapid Pace

China is losing more manufacturing jobs than the United States. For the entire economy between 1995 and 2002, China lost 15 million manufacturing jobs, compared with 2 million in the U.S., The Conference Board reports in a study released today.
“As its manufacturing productivity accelerates, China is losing jobs in manufacturing – many more than the United States is – and gaining them in services, a pattern that has been playing out in the developed world for many years,” concludes The Conference Board study.
...
China is rapidly losing manufacturing jobs in the same industries where the U.S. and other major countries have seen jobs disappear, such as textiles. Matthew Spiegelman, Economist at The Conference Board and co-author of the study, notes: “The U.S. lost 202,000 textile jobs between 1995 and 2002, a tremendous decline by any measure. But China lost far more jobs in this sector –1.8 million. All told, 26 of China’s 38 major industries registered job losses between 1995 and 2002.”
The study points out that while developed countries’ jobs are being offshored to China, exports are only one piece of China’s industrial expansion.

The point being that even if the US was the only country in the world; high paying blue collar manufacturer jobs would have dropped significantly over the last N years. They would have been replaced by capital: including robots, computers and other machines.

Now I suppose we could all become like Sarah Connor and destroyed the machines before they become self aware and wipe us out... But compared to manufacturing jobs being replaced with R2D2, outsourcing is small effect.

In my former industry, semiconductors manufacturing the productivity of a factory workers has improved from when I started in 81 to now, between a few thousand to a few million times, depending if you count chips or transistors. Factories that use to employ many thousands of blue collar workers now employ a few hundred and produce tons more chips.

 

[chinaco]

I didn't say zero jobs were lost to outsource, I said most manufacturing jobs seemly disappeared due to productivity.

Productivity translated is lower wages. Money is the the measure of productivity in this case.

It is a form a wage arbitrage. It will eventually normalize (differential reduces) when China and India's wages increase. But that will probably take 30 or 40 years.

People cannot be efficient enough to overcome the cost difference of wages that are 15-25% of a US wage. Now that companies have figured out how to move manufacturing offshore (and the risk seems low), I would expect it to accelerate. All manufacturing will not leave, but it will be a shadow of its former self.

Unfortunately, the next stop seems to be back-office white collar jobs. IT, Accounting, HR, etc. Hopefully the outsourcing will be domestic.

 

[youbet]

I didn't say zero jobs were lost to outsource,

Well, you're right. I guess you didn't say "zero jobs were lost to outsource." You said "The reality that Democratic politicians (and protectionist folks like Buchannan) don't talk about is that high paying blue collar manufacturing didn't get outsourced to Mexico, or India, or China."

So, my bad.

For others though, the fact is that some jobs were outsourced. In areas where the impact was concentrated, like Ohio, politicians like Hillary and Barack have been playing to that issue to win votes.

Hillary's handlers did magnificant work. Despite Bill being a big advocate of NAFTA, they made it appear as though Hillary was sympathetic to their plight and won them over...... or prevented them from moving away and over to Barack.